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Killing the American Dream

November 25, 2011
By George J. Bryjak

The public is finally starting to pay attention to the widening unequal distribution of income and wealth gap in this country and its impact on the American dream. Consider the following:

-Chrystia Freeland, global editor-at-large for Reuters, argues that the structure and workings of the American economy now favor a small number of people: individuals who run companies, technologists, engineers and Wall Street traders who have seen their income and wealth increase dramatically in recent years.

"Someone needs to admit," Freeland writes, "that modern capitalism isn't working for the middle-class, and find a way to make it work better before it's too late." Globalization and advanced technology have triggered economic changes that are "hostile to the middle-class majority." Freeland states that even former five-term Federal Reserve Chairman Alan Greenspan, "the high-priest of capitalism himself," acknowledged that growing economic inequality in the U.S. is a national crisis.

In a recent article, "The Rise of the New Global Elite," Freeland cites a 2005 report by Citigroup that stated: "The world is dividing into two blocs - the Plutonony and the rest." According to the Citigroup analysts, "In a plutonomy there is no such animal as the U.S. consumer, or the U.K. consumer, or indeed the Russian consumer. There are rich consumers, few in number, but disproportionate in the gigantic slice of the income and consumption they take. There are the rest, the non-rich, the multitudinous many." Freeland cites research that found the top 10 percent of U.S. households now account for almost 50 percent of all consumer spending.

While millions of good-paying, middle-class jobs have been outsourced by corporate America, Freeland notes economists Emanuel Saez and Thomas Piketty found that between 2002 and 2007, 65 percent of all income growth went to the top 1 percent of the population. After the financial crisis of 2008 and a slight decline in their earnings, the super-wealthy rebounded with a bang in 2009. The top 25 hedge-fund managers were paid, on average, $1 BILLION each, more than in the record-setting compensation year of 2007.

-In a recent commentary piece, Doug Hoffman gave us the usual song and dance about how the rich are paying more than their share of the nation's tax burden (no sources for any of his assertions). Here's the real lowdown from billionaire Warren Buffett, who knows a thing or two about the super-rich and taxes: "While the poor and middle-class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as 'carried interest,' thereby getting a bargain 15 percent tax rate" and pay almost nothing in payroll taxes. Buffet notes that it's a different story for middle-class Americans: "Typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot."

-In April the U.S. Permanent Subcommittee on Investigations released a 650-page report (the outcome of a two-year investigation), "Wall Street and the Financial Crisis: Anatomy of a Financial Collapse." As the executive summary states: "The investigation found that the crisis was not a natural disaster, but the result of high-risk, complex financial products, undisclosed conflicts of interest, and the failure of bank regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street." In other words, there was systematic fraud and deception on the part of mortgage lenders, banks and others orchestrated with the knowledge of government regulatory agencies.

A Time magazine article,"25 People to Blame for the Financial Crisis," included Bill Clinton, George W. Bush and Alan Greenspan. All were champions of government deregulation of the marketplace and financial institutions. A staunch advocate of Ayn Rand's libertarian philosophy, Greenspan told a congressional committee that he "made a mistake" in presuming that financial firms could regulate themselves. I'm sure that was a great comfort to the tens of millions of Americans who needlessly lost their savings and their homes in the economic meltdown.

In the aftermath of the savings-and-loan crisis of the 1980s that cost taxpayers approximately $125 billion, the government conducted a vigorous investigation (more than 1,000 FBI agents and at least a dozen Justice Department task forces were involved) that resulted in hundreds of convictions. Today, three years after the 2008 financial crisis, only two senior executives at a U.S. bank, hedge fund, mortgage firm or insurance company have gone to prison. There are at least three reasons for this dearth of convictions:

1. As a result of deregulation, much of what these individuals did to bring about the financial collapse was not illegal.

2. Peter Grupe, the FBI agent in charge of white-collar crime in New York City, argues that these cases are "long-term, and resource intensive."

3. Public prosecutors may be reluctant to bring anything but sure-win, "dead bang" cases to trial when faced with an army of high-priced lawyers representing Wall Street defendants.

In a recent speech to the Public Citizen group in Washington, D.C., journalist and public commentator Bill Moyers made telling observations by way of the individuals he quoted. Thomas Jefferson saw the danger that corporations posed to our democracy from the earliest days of the republic. Our third president hoped that "we shall crush in its birth the aristocracy of our moneyed corporations which dare already to challenge our government to a trial of strength and to bid defiance to the laws of the country." (One can only imagine what Jefferson would think of "corporate personhood," which gives corporations many of the same constitutional rights individuals enjoy.) In 1890, the populist orator Mary E. Lease stated that "Wall Street owns the country. ... Our laws are the output of a system which clothes rascals in robes and the honest in rags. The political parties lie to us and the political speakers mislead us. ... Money rules." Speaking of Lease, Moyers noted: "She should see us now."

Moyers quotes political scientists Jacob Hacker and Paul Pierson, who argue that "the United States is looking more and more like the capitalist oligarchies of Brazil, Mexico and Russia, where most of the wealth is concentrated at the top while the bottom grows larger and larger with everyone in between just getting by." A recent Time magazine article notes "a spate of new reports" have concluded there is less upward mobility in the United States today than in many parts of "debt-ridden, class-driven, old Europe."

In his Public Citizen speech, Bill Moyers quoted former U.S. Sen. Robert LaFollette (1855-1925) who believed "democracy is a life, and involves constant struggle." One could argue that in a democratic society, people get the government AND economy they deserve. We have stopped struggling and ceded the economic well-being of this country to the "moneyed corporations" and their government handmaidens that Thomas Jefferson warned us about. Grounded in a vibrant middle-class, the American dream is dying.

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George J. Bryjak lives in Bloomingdale, retired after 24 years of teaching sociology as a professor at the University of San Diego.

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Sources:

Buffett, W. (Aug. 14, 2011) "Stop Coddling the Super-Rich," New York Times, www.nytimes.com

"FBI Keeps Wall Street in Its Crosshairs" (June 30, 2010) ABC News, www.abcnews.com

Foroohar, R. (Nov. 14, 2011) "What Ever Happened to Upward Mobility?" Time

Freeland, C. (Sept. 30, 2011) "Capitalism is Killing the Middle-Class," The Week

Freeland, C. (June 9, 2011) "Getting by Without the Middle Class," New York Times, www.nytimes.com

Freeland, C. (January/February 2011) "The Rise of the New Global Elite," Atlantic Monthly

Grant, D. (Oct. 11, 2011) "Fact of Fiction? No one on Wall Street went to jail for financial crisis," Christian Science Monitor, www.csmonitor.com

Hoffman, D. (Nov. 8, 2011) "Political rhetoric - tax the rich," Adirondack Daily Enterprise

Moyers, B. (Oct. 20, 2011) "Remarks to the Public Citizen 40th Gala, Truthout, www.truthout.org

"Wall Street and the Financial Crisis: Anatomy of a Financial Collapse" (April 13, 2011) Committee on Homeland Security and Governmental Affairs, Washington. D.C., www.hsgac.gov

"25 People to Blame to for the Financial Crisis" (accessed 2011) Time Special, www.time.com

 
 

 

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